Democrats agreed to drop their demand that the payroll tax cut be paid for by a millionaire surtax. “Yeah, that’s gone,” Senator Max Baucus said in an offhand way about the surtax’s demise. Thanks for the clarification, Senator. By contrast, Republicans still have not dropped their push for the extension to be tied to approval of the controversial Keystone XL pipeline:

Republicans remained publicly quiet about the proposal to temporarily extend the tax break, but one senior GOP adviser noted that it would lead to two more months of Republicans pushing for the oil pipeline.

Obviously we need more detail on this emerging compromise before reaching any hard conclusions. But right now it appears that the short term extension will merely postpone the battle over whether Republicans will achieve their primary objective in this fight. Meanwhile, until we hear otherwise, we should assume that the millionaire surtax — the primary objective of Dems — has been shelved permanently, even though it’s broadly supported by Dems, independents and Republicans alike.

Indeed, Dems are pushing to help pay for the extension by closing the tax loophole for corporate jet owners, but even that remains in doubt, with Republicans pushing for still more spending cuts to fund it.

Fun footnote: The payroll tax cut extension is the only piece of Obama’s jobs package that Republicans have agreed to thus far.

* The battle to define Romney’s Bain years is on: I agree with Mike Allen: This quote from Romney was the most important from last night’s debate:

“I think the president is going to … go after me and say, ‘You know, in businesses that you’ve invested in, they didn’t all succeed. Some failed. Some laid people off. And he’ll be absolutely right.’ But if you look at all the businesses we invested in, over a hundred different businesses, they added tens of thousands of jobs. In the real world that the president has not lived in ... not every business succeeds, that not every entrepreneur is lucky enough to do as well as the entrepreneurs that I described....

“In the real world, some things don’t make it...I’ve learned the lessons of how the economy works. This president doesn’t know how the economy works. I believe to create jobs, it helps to have created jobs.”

Romney is rapidly moving to define his Bain years on his own terms — as proof that he will bring real-world private sector experience and a businessman’s fresh eye to what really makes the economy tick and what doesn’t. Dems want to define Romney’s Bain years as emblematic of the predatory, unfettered capitalism that helped lead to the crisis and has led to public anger over Wall Street’s lack of accountability. The Dem goal is for voters to decide that Romney’s corporate past shows that Obama — and not Romney — has the middle class’ best interests at heart, and that Romney’s true allegience and policy priorities are tilted towards the rich. But Romeny is determined not to let Dems do the defining, and the question of how the Bain years are perceived by voters will be absolutely central in 2012.

* Did Romney really create tens of thousands of jobs? Post fact checker Glenn Kessler’s bottom line: The claim is probably true, but there’s no conclusive evidence that it’s the case. Even if it is true, it doesn’t account for the layoffs that occured on Romney’s watch — ones that seem to have helped produce enormous profits for his firm.

* Obama campaign video touts Iraq promise kept: The Obama campaign is out with a new Web video that recaps Obama’s early opposition to the war, his steady criticism of it over the years, his vow to end it if elected president, and his ultimate fulfillment of that promise.

Chuck Todd theorizes that we’ll be seeing this in ad form next fall. What’s remarkable is that the war that defined our politics for literally years, and launched Obama’s national political career — he would not be president today without it — may end up being a relatively minor footnote in the reelection campaign.

* Obama reelect reality check of the day: A new Associated Press poll finds that for the first time, a majority, 52 percent, say Obama doesn’t deserve a second term.

But here’s an interesting caveat: This comes even as the poll finds the public’s outlook on the economy is modestly improving. This suggests (perhaps ominously for the president) there will likely be a lag between any growing optimism on the economy and any improvement in Obama’s political fortunes.

Also: Obama is beating Newt Gingrich by far more (51-42) than he’s beating Romney (47-46), which again explains why Dems are training all their fire on Mitt.